Credit Bureau Asia: What’s next for the SGX newcomer?

• Credit Bureau Asia clocked a 15% premium on its debut
• Its initial public offering was heavily oversubscribed by retail investors
• The credit and risk information firm has a defensive business model with growth prospects
• The board plans to recommend dividends of at least 90% of net profit in the next two years

The Singapore Exchange (SGX) has welcomed the city-state’s largest provider of credit bureau services to its mainboard.

Credit Bureau Asia (CBA), also the sole credit bureau in Cambodia and Myanmar, made a stellar market debut last Thursday (03 December 2020).

The counter hit an intraday high of around S$1.19 on its first day of trading, exceeding its initial public offering (IPO) price of S$0.93 by nearly 28%. It then closed at S$1.07, or a 15% premium to the offering price, with 9.4 million shares changing hands.

Since then, CBA’s stock price has held largely steady, slipping a tad to finish Tuesday (08 December) at S$0.98, down 0.5% on the day but still up 5% from the IPO price.

Highlights of CBA’s successful IPO

Retail investors were eager to mop up the 1.5 million shares in the IPO’s public portion, which was subscribed by more than 60 times.

The 28.5 million placement shares likewise garnered 'strong interest' from institutional and other investors, said CBA.

Separately, 12.2% of the total issued shares went to four cornerstone investors: Aberdeen Standard Investments, Affin Hwang Asset Management, Eastspring Investments, and Tokyo Shoko Research.

The bulk of the S$23.6 million net proceeds will go into strategic investments, regional expansion, acquisitions and organic growth initiatives, the company added.

What are CBA’s plans?

CBA offers credit and risk information solutions in Southeast Asia, boasting thousands of clients such as banks, multinational corporations, telecommunications providers and government bodies.

In a market update, SGX noted that the homegrown company has maintained an 'extensive information database which would be difficult for new market entrants to replicate'.

Moreover, said SGX, the company has a defensive business model. In an economic downturn, customers are likely to conduct more risk assessments and buy more credit reports through CBA.

Within its existing markets, CBA is eyeing growth, including the expansion of membership for its credit bureau services to insurers, leasing companies and Singapore’s upcoming digital banks.

In Cambodia, CBA may introduce services such as know-your-customer checks and fraud detection, while its plans for Myanmar include credit reports and monitoring services.

The company is also mulling an expansion into new Southeast Asian markets and wants to advance its technological capabilities.

What do CBA’s financials show?

Its financial performance has been improving. The two-year compound annual growth rate (CAGR) in 2017-2019 was 6.7% for its combined revenues and 16.3% for net profit.

Adjusted earnings per share (EPS) amounted to S$0.0305 for 2019 and S$0.161 Singapore cents for the first half of 2020.

CBA’s board intends to recommend dividends of at least 90% of net profit for 2021 and 2022. This would imply a dividend yield of 3% based on its FY2019 adjusted EPS and at least 90% of net profit for that year, said SGX.

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